Commodity Tracker: 4 charts to watch this week

S&P Global Commodity Insights editors are keeping an eye on gasoline prices, amid the upcoming US presidential elections. Meanwhile, the US gas storage is narrowing down due to summer weather. Jet fuel supplies in Japan and soybean oil demand in Brazil are also in focus.

1. Gasoline prices in focus ahead of US presidential election

What's happening? Gasoline prices are expected to play a significant role in the 2024 US presidential elections. Throughout President Joe Biden's tenure, there has been a strong correlation between voters' disapproval and gasoline prices, leading the Biden administration to release 180 million barrels of strategic petroleum reserve crude into the market in 2022. The correlation has weakened in the recent months following the Israel-Hamas War.

What's next? Retail gasoline prices appear unlikely to rise during the 2024 election season, according to S&P Global Commodity Insights forecast. However, US gasoline supplies are tight and, while refinery runs remain high, forecasters have predicted an active Atlantic hurricane season that could threaten US Gulf Coast refinery operations. Gasoline stocks on the US Atlantic Coast were 11% below the five-year average at 56 million barrels as of June 21, US Energy Information Administration data showed. Further declines would likely support the New York-delivered NYMEX RBOB futures contract.

2. Jet fuel suppliers miss out on Japan's tourism boom amid logistical woes

What's happening? Japan's jet fuel sales in April rose 30.3% on the year to 75,700 b/d, latest data from the Ministry of Economy, Trade and Industry showed. Over January-April, jet fuel sales rose 8.5% year on year to 72,813 b/d.

What's next? Yen's weakness will likely continue fueling a tourism boom in Japan, leading to robust passenger flight traffic in and out of the country and boosting jet fuel demand. Distribution constraints and limited logistical capacity will likely hinder local refiners as well as wholesale traders to transfer higher volumes of jet fuel to regional airports, and Japan's overall jet fuel sales may struggle to reach 2019 pre-COVID level of around 85,000-90,000 b/d, according to industry sources. Many small ships of 500 kiloliters or less are being scrapped, while some oil product transportation ship operators are going out of business. In addition, a parliamentary legislation, which took effect in April to control workers' overtime hours, has reduced the turnover rate of domestic ships and tank trucks, cutting the amount of oil products delivery and distribution.

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3. Retreating US natural gas storage surplus buoys market sentiment

What's happening? The US natural gas storage surplus to the five-year average retreated for a seventh consecutive week in late June, falling to 528 Bcf, according to the US Energy Information Administration's latest inventory report published June 27. Since mid-March, the US storage surplus has fallen from an annual high at nearly 680 Bcf, largely due to output cuts made by producers this spring and to strong gas-fired power demand more recently. On June 27, the prompt-month gas contract was trading around $2.75/MMBtu -- holding on to gains that have accrued since late April when front-month prices were trading under $2, data from CME Group and Commodity Insights showed.

What's next? Through at least mid-July, many market analysts expect the US gas storage surplus will continue narrowing as exceptionally hot summer weather persists across much of the US Lower 48 states. Hot weather, strong power burn demand and the narrowing domestic inventory surplus have helped keep the NYMEX gas futures rally going.

4. Biodiesel mandate, domestic demand pressure Brazilian soybean oil exports, prices

What's happening? Blending mandates are driving domestic demand for soybean oil, the largest raw material contributor for biodiesel in Brazil. Brazilian biodiesel production relies on soy oil, which accounts for more than 70% of raw materials. As blending mandates are expected to rise further, the share could see an additional increase. The immediate impact is seen on the country's soy oil exports, which are projected at 1.4 million mt for marketing year 2024-25, down 22.2% year on year, despite a rising production trend. Platts soybean oil FOB Paranagua was trading at an average of $953.36/mt in June, one of the lowest levels in three years.

What's next? Brazil's soybean crush volume in April was at a record 4.8 million mt. Despite weak margins and limited potential due to floods in Rio Grande do Sul, analysts expect crush volumes to remain at near-record levels throughout the season. Abundant supplies, along with reduction in exports, are expected to put further pressure on soy oil prices. The announcement of a restrictive measure on the use of tax credits left Brazil's export markets at a brief standstill in the first week of June. The provisional measure is likely to continue impacting Brazilian grains and oilseeds exports, including soy oil, in the short term.

Reporting and analysis by Eamonn Brennan, Philip Vahn, J Robinson, Shivam Prakash